Just a Correction? + Nitrogen Integration!

AlphaDroid and Nitrogen Integration

Nitrogen Wealth Integration

AlphaDroid Posts Models & Tools in Partner Store

Starting Monday, April 29th, AlphaDroid’s offerings will be live in the Nitrogen Wealth Partner Store. In addition to offering Advanced Momentum and Risk Mitigation Tools, AlphaDroid has posted 25 awesome SMA Models that may be imported into client portfolios for experimentation or presentation purposes. They includes all 16 Alpha Sheet Models, all five Prudent NPF Models, two Genetic Algorithm Models, and two Keep-It-Simple Models. Please view the video for a summary overview of our Partner Store offerings.

Spooked by the Correction?

OMG – just look at the size of that monstrous nose-hook at the tip of the 6-year SPY chart! As small (and normal) as this correction is, it spooked our comfortable complacency created by this year’s relaxing period of low volatility and consistently rising markets. I received a few anxious calls and emails regarding possibly bailing out before it was too late, and concern that SwanGuard might trigger.

In last month’s Newsletter, there was a table indicating that a correction of about 5% is expected on average about every 8 months. And, we were due for a pause that refreshes. A few days ago Jaimie Dimon, CEO of Chase Bank, commented to his audience that corrections are sharp and short, whereas real bear markets tend to roll over comparatively slower. This is why StormGuard is designed to be relatively insensitive to corrections and prevent whipsaw losses that are often otherwise generated.

SPDR S&P 500 ETF - 6 Months

6 Months

SPDR S&P 500 ETF SPY - 6 Years

6 Years

The reasons SwanGuard did not trigger include (1) volatility failed to meet both strength and duration requirements, (2) treasuries (TLT) indicated that there was no flight to safety, (3) the equities move downward was insufficient. In other words, this was not a Black Swan event, but rather investors getting it through their thick heads that “higher for longer” interest rates promised by the Fed were going to be real. In the end, investors were simply making a few reality adjustments – but not selling out. The market correction is already nearly repaired and is not ready to roll over quite yet.

SwanGuard Black Swan Indicator April 25, 2024
iShares 20 Year Treasury Bond ETF - 6 Month

6 Months

Peter Lynch Quote
CBOE 20 Year Treasury Bond ETF - 6 Months

What is StormGuard Doing?

In the four charts below, the first is StormGuard’s composite indicator. Although it has peaked and has somewhat declined, it remains fairly positive. It is designed to respond slowly enough to avoid whipsaw losses that are commonly generated during corrections if responding too quickly. A common question is “How long would it take StormGuard to trigger if things went really bad?” The fourth chart would likely be the first one to go negative, and based on its movements in the past, it would be possible for it to trigger at the end of May if the month goes poorly.

4 StormGuard Charts April 26, 2024

Presidential Election Cycle?

The chart indicates that the fourth year of a Presidential term can be pretty good – but only if the challenger gets elected. But that may be bass-ackwards. It turns out that there is an 80% chance of the incumbent staying in office if the market does well in the three months before the election. Notably, the $1.9 Trillion spending from the Inflation Reduction Act and the Infrastructure Bill will start filtering into the economy in 2024 and may help delay any pending economic ailments from taking root until later. Eventually, we must pay the piper.

S&P 500 Index Returns Based on a 4 year Presidential Cycle

Recession Waiting in the Wings?

Recession proponents suggest that the recession has been delayed by a combination of continued excess federal spending and our new obsession with AI. In the chart below, the Sahm Recession Indicator (blue line) signals the start of a recession when the three-month moving average of the national unemployment rate rises by 0.50 percentage points (red line) or more relative to the minimum of the three-month averages from the previous 12 months. The Sahm Recession Indicator seems to be about to cross the red line but has dithered a bit. There are other periods where a crossing was near but did not occur. The jury is still out.

Can we avoid the pending recession? Will it different this time?

Real-time Sahm Rule Recession Indicator 1945-2024

Commercial Real Estate Crash?

The COVID-19 social restrictions led to a significant shift towards working remotely from home – thus reducing the office space required for employees. Companies have generally concluded that most employees can work from home more productively than commuting to the office. This has led to a significant decline in building occupancy, lease revenue, and thus the ability to make loan payments or renew loan contracts. Thus commercial property values are crashing and loan defaults are on the rise.

Current headlines include:

  • Why Fitch Thinks the Coming Commercial Real Estate Crash Could be Worse than 2008
  • Kevin O’Leary Says a Coming Real Estate Collapse Will Lead to ‘Chaos’
  • The Brutal Reality of Plunging Office Values Is Here
  • The Coming Commercial Real Estate Crash that May Never Happen
Scott Juds

Patience, not panic! Rules, not emotion!
May the markets be with us,

Scott Juds
Chairman & CEO, SumGrowth, Inc.

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Investing involves risk. Principal loss is possible. A momentum strategy is not a guarantee of future performance. Nothing contained within this newsletter should be construed as an offer to sell or the solicitation of an offer to buy any security. Technical analysis and commentary are for general information only and do not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of any individual. Before investing, carefully consider a fund’s investment objectives, risks, charges, and expenses, and possibly seek professional advice. Obtain a prospectus containing this and other important fund information and read it carefully. SumGrowth, Inc. is a Signal Provider for its SectorSurfer and AlphaDroid subscription services and is an Index Provider for funds sponsored by others. SumGrowth, Inc. provides no personalized financial investment advice specific to anyone’s life situation and is not a registered investment advisor. See additional disclaimers HERE.